Research released today by the Institute of Public Affairs outlines how a dramatic re-shaping to the structure of Australia’s economy has largely benefited big corporates and the financial sector, at the expense of family-run and small businesses.
The analysis, which is based on data from the Australia Bureau of Statistics, found that the share of national income accruing to family-run and small businesses has declined from 26% in 1960 to just 9% in 2019.
“The changing structure of the Australian economy poses an existential threat to our way of life. Our robust liberal democracy is based on broad-based asset ownership, but small and family-run businesses are being squeezed by big corporates and the financial services industry,” said Cian Hussey, Research Fellow at the Institute of Public Affairs.
“This is further evidence that Australia is becoming an oligopoly economy, where an increasing share of national income is dominated by a small number of large private and public sector firms, at the expense of mainstream Australians working for family-run and small businesses.”
The report also finds:
- There is no evidence of a long-term, structural decline in the labour share of income, which increased slightly from 51% in 1960 to 52% in 2019.
- 65% of the increase in the capital share of income since 1960 has been driven by rising property values and the growth of the financial sector.
- The share of housing income has increased substantially, from 2% in 1960 to 8% in 2019, even as the homeownership rate has declined.
“Workers receive the majority of national income, and so disproportionally benefit from economic growth. Policies which support growth, such as tax cuts, cutting red tape, and liberalising industrial relations, also support workers,” said Mr Hussey.
“Compulsory superannuation has caused one of the largest transfers of wealth from working people to the bloated financial services industry. Super is a public policy failure of epic proportions; it has simultaneously increased the burden on taxpayers and reduced the lifetime earnings of workers.”
“The financial services industry has almost tripled its share of national income since compulsory super was introduced. Meanwhile, the homeownership rate is declining while national income accruing to property owners is increasing. These structural shifts are alienating mainstream Australians and must be addressed by policy makers.”
“The lockdown-induced recession has exacerbated structural issues in the economy. Young people, small business owners, and the private sector have been smashed by lockdowns while the big business, the public sector, and the financial and political elites have been unaffected,” said Mr Hussey.
Download the report.